Mai Chen: Aussies in clear breach of trade deal

There are remedies against supermarkets pulling Kiwi produce but they require political will to get a result

Shutting out Kiwi suppliers goes against the spirit of the CER. Photo / Thinkstock

There is no doubt Australian supermarkets pulling New Zealand suppliers for their home brand products is in breach of both the objectives and spirit of trade agreements between the two countries.

There is also no doubt the Government can help Kiwi businesses secure market access and fair trading conditions. The objectives of the Closer Economic Relations Agreement (CER) signed by NZ and Australia in 1983 to make it easier for companies from both countries to do business with each other are to:

Strengthen the broader relationship between Australia and NZ.

Develop closer economic relations between the member states through a mutually beneficial expansion of free trade.

Eliminate barriers to trade in a gradual and progressive manner under an agreed timetable and with a minimum of disruption.

Develop trade between NZ and Australia under conditions of fair competition.

The action of the Australian supermarkets is clearly discriminatory and contrary to CER objectives. But while the decision puts Kiwi suppliers at a distinct disadvantage and imposes a condition of unfair competition, the agreement is one between the Australian Government and the NZ Government. It is not between overseas supermarket companies and NZ suppliers.

There are, however, actions our Government can pursue. First, both countries are members of the World Trade Organisation and subject to other free trade agreements, such as the WTO Agreement on Sanitary and Phytosanitary Measures and the Agreement on Technical Barriers to Trade. Both require Australia to take "reasonable measures" to make sure non-governmental bodies do not impose standards, conditions or regulations that might be discriminatory or a barrier to free trade.

But the difficult legal point is whether supermarket companies fall within the definition of non-governmental bodies. The kind of non-governmental bodies the two agreements are contemplating are those exercising a public power in some way, usually through setting industry standards or regulations, such as food safety or consumer safety.

Continued below.

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The second action is to advance a non-violation complaint or situational complaint under our trade agreements for allowing Australian supermarkets to keep applying their policy. A non-violation complaint requires NZ to point to something the Australian Government is doing (or not doing) that breaches trade agreements, difficult because the decision has been made by a private company.

Alternatively, a situational complaint is a formal request for the two countries to consult each other to come to an "equitable and mutually satisfactory solution".

The problem is both those complaints are a weaker form of dispute resolution which requires political commitment and buy-in to achieve anything meaningful. New Zealand can request formal consultation, but whether Australia will come to the table and do anything about it is debatable. When Prime Minister John Key asked his Australian counterpart Tony Abbott to intervene last week, the answer was no. This is puzzling given Australia exports 40 per cent of its food production and wouldn't want other countries treating its suppliers the way it's treating New Zealand's.

Other powerful tools are being used to pressure Australian supermarkets to change their position and to highlight public discontent. The latest is Labour MP Shane Jones attacking Australian-owned Countdown for allegedly demanding retrospective cash rebates from suppliers to make up their profit shortfall.

Kiwi suppliers can also contact the Australian Competition and Consumer Commission on being shut out in Australia and the NZ Commerce Commission may be contacted over the retrospective rebate issue.

What may tip the balance is public pressure through social media, consumer purchasing power, and the risk to Woolworths' reputation and brand. A Facebook group called Boycott Countdown has been set up and the issue has trended on Twitter this week. This should give the Australian supermarkets cause to pause about what customers think of shutting out Kiwi suppliers and the impact on their bottom line.